Untitled Texas Attorney General Opinion ( 1945 )

OFFICE OF THE ATTORNEY GENERAL OF TEXAS
AUSTIN
GROVER SELLERS
*_:
ATIORNEI Gs?al?AL
Ymfarhbie Ernest Cuba
county nttorn6y, Ll Paw county
Yl Yaw, Texan
Opiaioa sao. o-bebo
lie: AMe88wnt of 8har68
of ,acrtloarl
bank abook.
luoh ohwe am requfred to br
b y th e8hareholdere lt tlmlr *
,and toll falne.*
net 6apitfAl6Q86t8 to WZ'iV6 at th6 V&b8 beok Of tb Ihbal-08."
WQ alated in 6 Tex. Jur. 340:
*It fk proper for tbw awewor or the board
to eoaeider a11 eAeaumt8 whlab trnd to aompow or
8UgWnt'ti~ VkiUS Of th0 ItOOk in the h~t1ia8Or the
lndlvldual rtookbolder, that is to ray, t&s capital.
QUX-&Q, tmdiilded pWrlf8 and 611 other perlonal
and mm1 property owned by the bank as a eorporation.'t
gonorable Arnest Culnn, page 2
It ie insoonneotion with thir method that your problem
aris88r The inatitutlon in question has included nn item o?
$265.376.23 as "Other Liabilitiesv in Its "'Reportof Conditions
at the Close or Buelnew on Lhmember 30, 19U.w In another
stateursntof oonditlon mailed to It8 depositors however, this
item 18 inoluded within an aggregate figure of 4629,827.92, which
is entitled, "Heservetv:Interest, Taxes, Contingenoies end Cther
Liabilitie8.v The asse8sor is oontending that SuOh fund8 being
vBe8ervea* are Oapltal fUnd8 in the hand8 ~0r the bank nnd should
Ohwdore be oonsidered as auginenting the value of'the stook, The
other oontentlon pursued by the bank 18 that the (225,976.2S por-
tion Of tha #629,827.92 8hould not be treated a8 oapital fUnd8,
but a8 aliabilitfe8* for the rearon that the )265,376.23 Item
ie made up 0r "renerve8m ror paynbsnt0r 8peOisl 80000ntsi nsmely,
to pay intere8t on saving8 aooount8, oltr taxer, payroll ~texer,
lntere8t on Oertirioater of depoalt, Federal DepoosltInmranoe
Companyaa8essments, surety bonds, and old age a88i8tanoe taxem;
and thut eaoh month there la plaoed in these aaoounts an amount
that ha8 aoorued in there different iem8.
Your problem then lnvolveo the proper interpretation of
a ballkingin8titUtiOn's rin6n0isl 8tetement as on aid in erriring
nt thenttue value 0r it8 ahares. Neither will the Court8 disturb
sn n88008ment fairly arrived at wr say this drpartment assume
the role or sn interpreter 0r rlaanoial statirtio8. Value or
looal bank etook, lika Value oi real estate, I8 arrived at by
eoneideratioa of raots more eu8geptible of determination by loos1
experta, those iamlliar with the Looal ploture and oapable of giv-
ing proper weight to all availabl*,evidenae. The Legislature ha8
thus vested sole discretion in Q:``luationand equalization of values
of property aubjeat to taxation in the local aasetwaor and board of
equelieation~. ~hie department is justiried in offering advioe,
however, where the railure to ooasider a given faot or the improper
consideration given a raot may amount to arbitrary action or the
abuse or dlsoretlon.
ue therefore advise you thnt reaognleed aooounting praatloe
distinguishes surplus reserves suoh ae for additions, antioip:jted
losses, bond sinking fmds, and the like from w-oalled “reserves”
set up for contra asset aooounte, euah as accrued liabilities.
while aaorued liability “reSerVe0” repreaent runds held by the
bank not immediately payable, by their very nature as accrued
t
liabilities or debts, little, if any, oonsideration oould be aooorded
euoh runas am elements tending to oompose or augment
, the value 0r
th, stook in tiie/ h,mds ot the stoakholder. hw0~8, ir the
raats are found 'to 'be am stated by the bank, the assessor and county
oom;nieslonerelcourts should give appropriate ooneideration to the
raot that the $283.376.23 portion of the so-called "reserve' fund
represents definite accrued liabll1ties rather than capital funda,
eurplue or undivided prorita. The assessor or the board of epualize-
tion may, of oourse, In ereroising their expert administrative Judg-
ment, oonalude that 813amount la escee8 0r that neoessary to meet
these liabilitiaa haa been eet aside. Any 8uoh exoese should, of
oourse, be treated am eurplu8 or undivided prOrit8.
It le beliaved that the rationalization suggested in
thi8 opinion will serve to distinguish it ito3 o-pinionHo``tJ072
to which you Invited the attcmntlon or this departnmnt,.
opinion lnvo3ved a fund set up ror oontingencle8 r#brrr than
eoorued llabilitiee and the holding wa8 that such fund ~618
‘one of the feotors to be taken into ooneideration bl the
board of eQuell%atlon in fixing the value of the stook inr tax
purpoOee.w
The principles met forth in thi8 opinion should answer
the supplemental question presented in the fifth paragraph of
your letter of September 28th. In the event they do not, how-
ever, kindly met rorth tts r80t8 upon whioh``#&!hi&&tlon i8
based, a8 you have done the main question pzerrenS+d,and thi8
opinion will be eupplemsnted aooordingly.
Yours very truly